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Research Questions

What was the congressional intent in mandating the establishment of the Inventory of Contracted Services (ICS)?

How well do the ICS data meet congressional objectives and DoD stakeholder needs?

Where are there gaps between the ICS data and data that would be most useful to DoD and congressional stakeholders, and what are the reasons for these gaps?

What lessons could DoD learn from non-DoD federal agencies for collecting, reporting, and using data on service contracts?

Could existing databases or other systems provide the relevant data in a timely, cost-effective way?

U.S. Department of Defense (DoD) spending on private-sector services has increased steadily over the past several decades to more than 60 percent of its overall budget. This growth has led to greater congressional interest in DoD's contracting practices, including the number of contracts for inherently governmental functions, contract management, contractor accountability, and contract waste, fraud, and abuse. Specifically, it has sought more oversight of the services purchased and the labor used to provide them, with the goal of increasing DoD's buying leverage and improving contractor performance. In 2008, legislation mandated the development of the DoD Inventory of Contracted Services (ICS), a database to collect information on the activities performed under DoD service contracts. Since that time, Congress has expressed concern about the methods DoD uses to collect this information and whether the ICS is useful to policymakers and DoD stakeholders. RAND was asked to conduct the congressionally mandated review of the system's data, gaps between the ICS data and congressional and other stakeholder needs, and whether the same or more useful information could be obtained from other sources. The study also included an assessment of legislative intent in mandating DoD to establish the ICS, a detailed evaluation of the current ICS metrics and data collection procedures, the development of alternative metrics drawing on different data sources, and illustrative analyses testing the validity of these alternative metrics and their corresponding data outputs.

Key Findings

The ICS Falls Short of Meeting Congressional and DoD Stakeholder Needs

ICS data are collected using various methods and data sources, calling into question their accuracy and thoroughness.

The format in which ICS data are reported to Congress is not useful and hinders the data's potential utility for analyses and decisionmaking. The data also fail to meet the needs of DoD stakeholders responsible for workforce planning and budgetary decisions.

In its current state, the ICS fails to meet congressional goals, which include strengthening oversight of DoD's contract practices, maximizing the use of competitive procurement processes, improving contractor performance, leveraging buying power, and accurately forecasting DoD labor and budget needs for in-house and contracted services.

There Are Alternative Data Sources for Meeting These Needs

The ICS collects information on contractor direct labor hours, or the time spent working by the contractor employees assigned to the contract, either estimated or provided by the contractors themselves. These data may be inaccurate and fail to support the types of analyses needed for decisionmaking.

Alternative metrics are at least as accurate and may be produced more quickly and at a much lower cost because they draw on existing data sources.

Three alternative metrics, in particular, could better inform analyses to support congressional and DoD stakeholder decisionmaking: (1) estimates of civilian labor in the form of full-time equivalents, (2) estimates of contractor labor in the form of full-time equivalents, and (3) estimates of contract employees as a proportion of overall contractor revenue.

Recommendations

DoD and policymakers should closely examine the utility of the ICS for the types of analyses they need to conduct to inform budget, sourcing, and other decisions.

DoD should consider alternatives to ICS metrics that do not require collecting, validating, auditing, and protecting the proprietary data reported by contractors.

Policymakers should mandate an institutionalized approach to analyzing DoD's spending on service contracts, including analyses of trends, forecasts, and labor.

Policymakers should refine ICS-related statutory requirements to better distinguish between different types of contracting and provide specific guidance on the data collection needed for each type.

DoD should periodically and selectively analyze commercial services to determine the lowest-cost and most effective staffing solutions for a diverse set of defense functions.

Table of Contents

Chapter One

Introduction

Chapter Two

Review of the Relevant Literature and Congressional Intent Underlying the ICS Requirement

Chapter Three

Assessing the Success of the ICS in Meeting Congressional Objectives and DoD Needs

Chapter Four

Why Are There Gaps Between the Current ICS and What Congress and DoD Envisioned?

Chapter Five

Potential Insights from Other Data Sources

Chapter Six

Risks and Benefits of Potential Alternative Methods of Data Analysis to Inform Congressional and Defense Decisionmaking

Chapter Seven

Conclusions

Appendix A

Spending on Services in the U.S. Economy and U.S. Department of Defense Over Time

Appendix B

Summary of FY 2014 ICS Report

Appendix C

Completeness and Quality of the ICS Data

Appendix D

Interview Protocols

Appendix E

Case-Study Comparison of Current and Proposed Alternative Metrics for Contractor FTEs Using FPDS-NG Contract Values

Appendix F

Defense Component Plans for Compliance with 10 U.S.C. 2330a

Research conducted by

This research was sponsored by the Principal Deputy Assistant Secretary of Defense for Manpower and Reserve Affairs and conducted within the Forces and Resources Policy Center of the RAND RAND National Defense Research Institute, a federally funded research and development center sponsored by the Office of the Secretary of Defense, the Joint Staff, the Unified Combatant Commands, the Navy, the Marine Corps, the defense agencies, and the defense Intelligence Community.

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